If you borrow over a certain amount, in most cases more than 75% of the house value, then the lender makes you pay for a MIG. If you default, then the lender makes a claim. What the lenders didn't always make clear - although I believe they must do now - is that the MIG is for the lender's benefit not yours.(posted 8208 days ago)Using your example with car insurance - if someone crashed into your car, and you made a claim, then your insurance company would pay you for the repairs. Your insurance company would then chase the other driver's insurance company for reimbursement and their insurance company pays yours. If the other person wasn't insured, then your insurance would take an action against that person.
Its the same with MIGs. The insurer insures the lender. Your defaulting on the mortgage, so the lender makes the claim and the MIG insurer pays out, but then has the right to chase you for the amount it paid out. When the insurer chases you instead of the lender, its done under the "rights of subrogation".
There are a number of people who have posted to this board who were not fully informed about MIGs. No doubt one of them will assist further.